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Unformatted text preview: 0.0745/4 – 1 = 1.88% d) Effective semiannual interest rate = e 0.0745/2 – 1 = 3.80% e) Effective annual interest rate = e 0.0745 – 1 = 7.73% D14 Effective annual interest rate of first investment = . Effective annual interest rate of second investment = . The first investment is better. D15 Effective annual interest rate of first loan = 7.35 . Effective annual interest rate of second loan = . The first loan is cheaper. A4 Effective annual interest (1 st local bank) = Total interest (1 st local bank) = Effective annual interest (2 nd local bank) = The loan from the first local bank is cheaper. A5 Total interest if loan is paid off after 1 year = EUR54.2M × 1.0575 – EUR54.2M = EUR3.117M Total interest if loan is paid off after 2 years = EUR54.2M × 1.0575 2 – EUR54.2M = EUR6.412M The company will save EUR6.412M – EUR3.117M = EUR3.30M...
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- Fall '08
- Interest, annual interest rate, local bank